Today, a significant report was released at business sustainability conference CERES in Oakland. The independent report, commissioned by Amazon Watch and our allies at Rainforest Action Network, was written by two experienced corporate governance and shareholder advocacy experts, Simon Billenness and Sanford Lewis.
The authors highlight the vast disparity between Chevron's disclosures to its shareholders and its sworn legal statements about the "irreparable damage" the company faces from potential enforcement of the $18 billion judgment against the company in Ecuador. We are sending this powerful document to California lawmakers, stock analysts, public pension funds, university endowments, institutional investors, and other public interest organizations nationwide, and it will be sure to grab the attention of many of these parties.
Amazon Watch Corporate Campaigns Director Mitch Anderson has written a post about it at the San Francisco Chronicle's City Brights blog, which I'm posting in its entirety below.
-Han, Amazon Watch
Mitch's post at the City Brights blog:
Chevron Faces Significant Risk in Amazon Controversy
Chevron Corporation, the second largest oil company in the United States, was found guilty earlier this year by Ecuadorian courts for massive environmental contamination of the Amazon and was fined upwards of $18 billion. The company has vowed to fight the verdict "until Hell freezes over."
This is an unwise approach for many reasons. First, and principally, because it is immoral. There are tens of thousands of people in the Ecuadorian Amazon who are suffering a massive public health crisis as a result of Chevron's (previously Texaco's) reckless pump and dump oil operations in their once pristine Amazon homelands. The people of Ecuador have the legitimate right to clean water and good health. Why would Chevron pour millions of dollars into a litigation and public relations strategy designed to condemn them to such misery? Secondly, it is unwise because it implies that Chevron will be fighting this lawsuit forever, mired in a costly and protracted -- and yes eternal -- legal Vietnam. Doesn't seem to make good business sense.
Today, an independent report, An Analysis of the Financial and Operational Risks to Chevron Corporation From Aguinda V. ChevronTexaco, by well-known corporate governance experts Simon Billenness and Sanford Lewis, confirms that Chevron's current scorched earth approach to the Ecuador litigation is fundamentally misguided. Released at a major institutional investor conference in Oakland, CERES, the report poses big questions around Chevron management's handling of the Ecuador disaster, concerns around the failure of the Board of Directors in executing their fiduciary duties with respect to the multi-billion liability, as well as raises fundamental questions about the wisdom of Chevron's "Hell Freeze" litigation and publication relations strategy.
According to the report, the plaintiffs in the Ecuador case have a strong case for enforcement of the Ecuador verdict in countries worldwide where Chevron has assets, which could lead to abrupt asset seizures in places like the Phillippines, Singapore, Brazil, Venezuela and Argentina. The report also warns that Chevron's current litigation and public relations strategy could threaten the company's "social license to operate" around the world:
"Chevron needs both legal permission from governments and "social license to operate" from local communities where the company is bidding to exploit new oil and gas fields...the notoriety of Chevron as an irresponsible operator {could} increase opposition by governments and local communities to granting Chevron legal and social license to operate in new areas."
The report also reveals that Chevron management appears to be caught up in a duplicitous web of lies, on the one hand confessing in sworn testimony the "irreparable harm" that the Ecuador verdict poses to their business interests, and on the other hand obfuscating the risks in their public filings and statements to shareholders.
For instance, the report cites sworn testimony by Chevron Deputy Comptroller Rex Mitchell explaining that:
"the seizure of Chevron assets, such as oil tankers, wells, or pipelines, in any one of these countries, would disrupt Chevron's supply chain and operations; and seizures in multiple jurisdictions would be more disruptive. Defendants' campaign to seek seizures anywhere around the world and generate maximum publicity for such acts would cause significant, irreparable damage to Chevron. Unless it is stopped, Defendants' announced plan to cause disruption to Chevron's supply chain is likely to cause irreparable injury to Chevron's business reputation and business relationships that would not be remediable by money damages."
The report goes on:
"While Chevron has admitted in sworn legal statements that the company is at risk of "irreparable injury to [its] business reputation and business relationships" from potential enforcement of the Ecuadorian court judgment, the company has failed to characterize these risks to the company in its public filings and statements to shareholders."
As the Corporate Campaigns Director for Amazon Watch, the environmental and human rights organization that has been spearheading an international corporate accountability campaign on Chevron for the last decade, I have been following Chevron's handling of the Ecuador disaster very closely.
It was refreshing, and even a bit heartening, to read this report because it suggests that, for Chevron, doing the right thing in Ecuador - that is, funding a full scale remediation and providing health compensation for communities - will actually help the company minimize the escalating financial, operational and reputational risk that a protracted and aggressive litigation strategy would entail. Doing the right thing in Ecuador makes good business sense. Chevron management and Board of Directors should read this report carefully. I know their shareholders will. Amazon Watch and Rainforest Action Network are sharing the report with California lawmakers, stock analysts, public pension funds, university endowments, institutional investors, and other public interest organizations nationwide.